Stocks rally as trade fears are put on hold

A lack of negative news has encouraged traders to pick up equities. In terms of geopolitics, not much has changed, but dealers are buying up stocks nonetheless.

Standard Life Aberdeen posted a 12% fall in first-half pre-tax profit. Assets under management and administration declined by 2.6%, and the fund management division confirmed that assets under management dropped to £557 billion, down from £575.7 billion. On the bright side, the company revealed an interim dividend of 7.3p – meeting forecasts. Standard Life Aberdeen cited the ‘challenging’ political and economic environment for the subdued six months. The share price has been in a downward trend since January, and if the wider negative move continues it could target 300p.

Commerzbank confirmed that the liquidity position was slightly worsened. The common equity tier (CET) 1 ratio – a gauge of the banks liquidity position – dropped to 13%, from 13.3%. This weighed on investor confidence as the struggling lender has taken a step backwards in terms of liquidity position. Traders shrugged off the fact that the bank swung to profit, and pledged to reinstate its dividend policy next year. The stock has been falling since January, and if the negative move continues it might target €8.

InterContinental Hotel Group posted a 9.7% rise in operating profit to $406 million, and the consensus estimate was $397.7 million. Revenue per room rose by 3.7%. The Chinese division saw the largest revenue per room growth as the rate was 10%. The US and EMEA registered growth of 2.7% and 3% respectively. Since September, the stock has been broadly moving higher, and if it holds above 4,595p – the 200-day moving average – its outlook might remain positive.

UniCredit shares are higher after the bank revealed better-than-expected second-quarter figures. Earnings from April to June were €1.024 billion, while equity analyst were expecting €975 million. CEO Jean Pierre Mustier claimed the bank is ‘making good progress’, and it is on target to achieve its two year target. Investors were happy to hear the positive update, it is worth noting the CET 1 ratio slipped to 12.51%, from 13.06%, and this is a concern as a solid balance sheet is important to retain investor confidence.

US

Stocks are in positive territory as the global feel good factor has spilled over to the US. We are not any closer to resolving the trade spat between the US and China, but in the ceasefire of tariffs and tough talk, traders have used to void to pick up stocks. The NASDAQ 100 isn’t too far from its all-time high, as traders are clearly over the Facebook flop that happened a few weeks ago. The S&P 500 and the Dow Jones hit levels not seen since mid-February, and this underlines the bullish sentiment in the market.

The US released the latest US JOLTS job openings today, and there were 6.66 million job openings in June, which was just ahead of expectations. The May report was revised higher too. The updates carries on from the broadly positive non-farm payrolls report last week.

FX

The US dollar index drifted lower as traders took their profits from yesterday’s rally – where it hit its highest level since mid-July.

EUR/USD recovered some of yesterday’s losses as short covering and bargain hunting propped up the single currency. Germany revealed disappointing economic updates for a second day in a row. The industrial production report showed a 0.9% decline, while economists were expecting a 0.5% drop. The German trade balance slipped to €19.3 billion, from €20.3 billion in May. Exports were flat on the month.

GBP/USD bounced back this morning after losing ground since Thursday. The Halifax UK house prices report showed a 1.4% rise in July on a monthly basis, and the June figure was revised to 0.9% from 0.3%. Yesterday the currency pair fell to an 11 month low, and it is concerning this morning’s rally was short lived.

Commodities

Gold has edged up on account of the softer US dollar. The metal has enjoyed a strong inverse relationship with the US dollar lately and the dip in the greenback today had lifted the commodity. Gold has been in a downward trend since April, and if the bearish move continues it could target $1,200.

WTI and Brent crudeoil are higher on the back of US imposed sanctions on Iran. To make matters worse for the Iranian regime, President Trump has warned that ‘anyone doing business with Iran will not be doing business with the US’. The tough stance from Mr Trump is likely to make Iran a pariah, and therefore oil supply could be hit.

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